Although COVID-19 may mean that this year’s delayed Olympic Games in Tokyo will be like none that has gone before, one constant will be the Olympic motto: Faster, Higher, Stronger. It is a motto that is also apposite for current market conditions.
Some of the moves in fixed income markets this year— such as the sell-off in Treasuries—have been faster than anything we have seen in recent years, and bond markets may remain in a state of flux for the remainder of 2021.
As a consequence, core fixed income allocations require risk-aware active management, and security selection in credit markets may become an increasingly differentiated source of returns.
Despite the sell-off in bond markets, global equities remain resilient and continue to grind higher. In our view, that dynamic is likely to remain intact as the earnings recovery becomes the key driver of returns as economies re-open.
And, of course, the moves in both bond and equity markets reflect stronger economic fundamentals with global activity set to surpass pre-pandemic levels this year.
This edition of the Market Know-How will focus on summarizing our macro expectations and providing
a framework for positioning over the rest of 2021.
We emphasize:
- Investing sustainably in an increasingly disrupted world.
- Moving down in market cap, out in geographic exposure, and forward in diversity.
- Focusing on high-quality fixed income as a key to risk management irrespective of interest rate levels.
